Official Development Assistance (ODA)

Japan's Basic Position on the Debt Problem Faced by the Heavily Indebted Poor Countries (HIPCs)

February 29, 2000

There is a pressing need to extend debt relief to the HIPCs that have been marginalized in the process of globalization and are suffering from an extremely heavy external debt burden.
Japan, as this year's Summit chair, will make further efforts to accelerate the implementation of the Cologne Debt Initiative with other G7 members.
In addition to effecting the reduction of bilateral claims, it is imperative that international financial institutions be sufficiently funded in order to reduce their own claims.

Debt relief alone is not a panacea for the problem of poverty in developing countries.
Rather, broad development strategies must be prepared in order to achieve rapid, sustainable, and equitable growth that would enable us to meet the 2015 International Development Goals under the DAC New Development Strategy on poverty reduction and provision of basic social services.
HIPCs themselves are for their part expected to adopt appropriate economic and social policies for debt relief to be effective in resolving debt overhang and poverty. To this end, Japan will spare no pains in supporting them.
In particular, capacity building in developing countries is the key to successful implementation of development strategies. As part of its wide-ranging initiatives, Japan has organized a series of Debt Management Seminars with a view to enhancing the debt management capability of African nations (Kenya, August 30-31, 1999; Singapore, November 29-December 3, 1999; Tunisia, April 10-14, 2000).

Japan has long played a leading role in the international initiative on debt relief for developing countries.
Since 1978, Japan has effectively written off over 340 billion yen (3 billion U.S. dollars) worth of debts owed by the 27 poorest countries (LLDC and MSAC) by providing debt-relief grants.

Japan's bilateral public claims (ODA and non-ODA) to the 40 HIPCs total approximately 10.5 billion U.S. dollars, the largest among G7 creditors. Thus, as a nation fully committed to implementing the Enhanced HIPC Initiative, Japan will be one of the biggest contributors in terms of bilateral debt relief under the Initiative.
Furthermore, Japan has disbursed or committed itself to contributing a total of over 200 million U.S. dollars to the debt relief trust funds established by the IMF and the World Bank.
Therefore, altogether, Japan will be one of the largest contributors in implementing the Initiative among the G7 (see Chart 1).

Japan is a major donor not just for Asian countries but also for the HIPCs, comprising mainly African countries, to which its provision of ODA, mainly in the form of grants, ranks as one of the largest (see Chart 2).

Japan takes the stance of promoting HIPCs' ownership in development.
Therefore, Japan fully respects any decision that each HIPC makes as to whether or not it requests debt relief, according to its own philosophy toward nation-building. So allegations that Japan put improper pressure on some HIPCs not to apply for the debt relief initiative are completely unfounded.
As it has repeatedly made clear, Japan will continue to be committed to supporting HIPCs with a wide range of ODA measures, regardless of whether or not they receive debt relief under the Initiative.

When effecting 100% debt reduction to countries eligible for the Enhanced HIPC Initiative, Japan will first reschedule its claims and then receive repayments from the debtor country while providing grant aid equivalent, to the amount repaid. This scheme has been internationally recognized since 1978 as being equivalent to 100% debt cancellation. (See Chart 3)
Moreover, this debt-relief grant scheme, just like the PRSP process, helps ensure that the funds released through debt relief are used for socioeconomic development and welfare of the people of the debtor countries.

When purchasing imported goods with debt-relief grant aid, the debtor country is completely free to decide from which country it will import; eligible source countries are OECD members and developing countries and territories on the DAC List of Aid Recipients, excluding the debtor country itself.